EU Quota Plan to be Revised

By Melissa J. Anderson (New York City)

Earlier this week, the EU shelved Justice Commissioner Viviane Reding’s plans for a vote on boardroom gender quotas for European companies. Reding’s suggested legislation would require all EU companies with more than 250 employees or making €50 million per year to ensure their boards were 40% female.

Upon coming into office, Reding had threatened to enact the quotas if EU countries didn’t begin to take gender diversity more seriously and implement their own targets. When they showed little progress this year, she turned around with a plan to enact the quotas rule. If companies didn’t comply, they would face stiff penalties.

The rule was put forth for debate by the EU’s executive body on Tuesday, and when it was clear that the majority didn’t support the quotas, the vote was scrapped. But, according to Reding and her allies, they intend to come forward with a compromise plan for another vote in November.

As the New York Times reported:

“There is still 40 percent,” Ms. Reding said in Strasbourg on Tuesday. “But the way to arrive there has been looked at in a different way.”

“The debate was very intense,” she said, explaining that the discussion on the legality of any quota was one of the reasons the meeting took several hours.

A vote on a revised proposal has been set for November 14.

Compromise?

Regardless of how the EU would like to improve gender balance in European boardrooms, it’s obvious that something needs to be done. Almost nine out of ten (86.5 percent) board members in the EU are male, and almost all (97.5 percent) of the chairs are men.

The NY Times has suggests that a Reding may be looking at a potential compromise plan – one in which the 40 percent quota would remain, but individual countries would decide which penalties companies may face if they don’t meet the target. The NY Times reports, “Under one possible compromise, the commission could agree to modify the measure by letting national governments determine whether any sanctions should apply to companies and organizations that failed to take steps like introducing transparent selection criteria to give more consideration to women.”

According to several news outlets – the New York Times, Reuters, and the Wall Street Journal, one of the key hang-ups about Reding’s plan was the legality of imposing such sweeping sanctions on companies existing in different national contexts.

A comply or explain rule has also been suggested.

The View from Norway

The quota is modeled on the one currently existing in Norway, which was enacted in 2003. Public companies had two years to comply with the law, or they would be delisted. While business leaders complained at the time, today opposition to the rule is scant.

The Financial Times reports:

“To look at the trauma it has caused in Europe, it is exactly the same as it was in Norway 10 years ago. Didn’t they learn anything from history?” asks Turid Solvang, managing director of the Norwegian Institute of Directors.

“Idar Kreutzer, who sits on the nomination committees of many Norwegian boards, says simply: “It is not a big issue any more. Everybody seems to be happy with the way things have developed.”

In addition to producing the well-documented results of a gender balanced board (more productive conversations, more innovation, better risk management), the quota law required Norway’s boards to seek out director candidates outside the executive suite.

The FT explains, “Headhunters were forced to look outside the normal cosy circles of chief executives sitting on each other’s boards and search in novel areas: lawyers, academics and former ministers have become non-executives while foreign businesswomen are in strong demand.”

That effort shines a spotlight on the other challenge facing companies in Europe and the rest of the world – while the issue of getting more women into the boardroom has gotten significant attention, the percentage of women in C-suite is miniscule across the globe.

It’s terrific that companies are beginning to seek out more diverse talent for boardroom needs, but a smart, thoughtful, long-term plan to increase the of women executive officers has yet to be put forward on a large scale. That will require a change in corporate culture where women are broadly viewed as leaders worthy of being included in the executive succession plan.